On June 17, 2013, Zajdel was arrested and charged with five counts of fraud, corruption, breach of trust and payment of secret commissions, related to construction permits issued between 2006 and 2011, when he was a city councillor.[3]

From October 2011 to March 2012, Zajdel was employed by Minister of Canadian HeritageJames Moore as “a liaison between the Government and the city’s cultural communities.”[3] He reportedly described the job as "connecting principally with the anglophone and ethnic communities and municipalities to see if they can benefit from various federal programs."[10]

In December 2011, Cotler claimed, after Zajdel had convened a meeting with municipal politicians in Mount Royal to explain the grants and programs offered by Canadian Heritage, and a phone campaign by the Conservatives in the riding, falsely claiming that he was about to resign, that Zajdel was in fact working as a "shadow MP," offering to help municipal politicians secure grants and services, and preparing for a second attempt to win the riding of Mount Royal.[11] Zajdel denied involvement in the phone campaign, stating that it was "a party thing."[11]

Zajdel quit his federal post in March 2012, explaining in an interview in early April 2012 that he resigned because the controversy surrounding his federal job was distracting people from the work of prime minister Harper, saying that he "was tired of being this distraction."[12]

On June 17, 2013, the Quebec government's anti-corruption unit, known as the Unité permanente anticorruption or simply UPAC, announced that Zajdel had been arrested along with the city's interim mayor, Michael Applebaum. Zajdel himself was charged with five counts of fraud, corruption, breach of trust and payment of secret commissions, related to construction permits issued between 2006 and 2011 when he was a city councillor.[2][3][13] According to arrest warrants issued by the anticorruption squad, the charges include arranging and accepting bribes from Montreal real estate developer Robert Stein between 2007 and 2008, in exchange for council votes by Zajdel in favour of Stein's real estate developments.[14]

According to CBC News, the president of Zajdel's Mount Royal Conservative riding association said it decided to cut ties with Zajdel after his arrest, explaining that "As an association we have a duty to represent the desire of our members and our members did not want to be associated with a gentleman who has been charged with corruption," stating later that Zajdel could be reinstated if he is cleared.[12]